US dollar trades close to all-time low against euro

CONCERN The euro is 8.5 percent stronger against the dollar than it was a year ago, with the greenback poised to continue its downward movement

AFP , LONDON

The euro soared close to its all-time high against the dollar in London on Friday on the last day of a year in which it gained 8.5 percent on a steadily weakening greenback.

The euro in afternoon trading was at US$1.3635 against US$1.3634 in New York late on Thursday. The single European currency at one point shot up to US$1.3661, just shy of the record US$1.3666 set on Thursday. The dollar was meanwhile at ¥102.53 after ¥103.4 on Thursday.

The euro is now 8.5 percent stronger against the dollar than it was a year ago and by most accounts it could climb still higher in the new year.

The trend has alarmed some European political leaders who fear that an appreciating euro will reduce the competitiveness of eurozone exports and threaten what is already a fragile recovery in the 12-nation zone.

Many analysts suspect that the Bush administration, despite its stated preference for a strong dollar, is in fact not unhappy with the dollar's slide, seeing it at as a means to boost US exports and thereby shrink the country's massive current account deficit.

The dollar could nonetheless see a degree of consolidation in the New Year after recent sharp movements. The euro has risen three percent against the greenback since Dec. 15.

But Neil Mellor of the Bank of New York said most traders were likely to be happy with the euro trading around the US$1.36 level, with the dollar broadly poised to continue its downward trend.

"All roads point south for the dollar," he said.

The yen is also likely to to edge ever higher against the US currency, although the possibility of intervention by the Bank of Japan to weaken the dollar will mean it will trade within a tighter range than the euro-dollar rate.

The euro was changing hands at US$1.3635 against US$1.3634 late on Thursday in New York, ¥139.74 (¥140.53), £0.7068 (£0.7078) and 1.5437 Swiss francs (SF1.5434). The dollar was at ¥102.53 (¥103.04) and SF1.1321 (SF1.1314).